As if we lack significant national challenges worthy of our attention, Republicans in Congress are pushing us toward the brink of economic catastrophe by refusing to raise the nation’s debt limit. Treasury Secretary Janet Yellen has announced that the federal government will run out of money on or around June 1, at which point she will be forced to declare the United States of America unable to pay its bills and therefore in default on approximately $31.5 trillion in debt.
The economic chaos following that announcement is hard to predict because we have never defaulted on our debts before. It is not the sort of thing responsible leaders would ever allow to happen. But the likely outcome is a loss of faith in U.S. treasury bills and bonds, which at present are the foundation of much of the global financial system, followed by huge spikes in interest rates on everything from credit cards to home and car loans, massive layoffs, a temporary end to Social Security, Veterans Administration, Medicare, and all other federal benefits and payments, and the collapse of our pre-eminent place as the world’s largest and most influential economy. If that happens, blame will attach exclusively to Congressional Republicans, for a default is completely avoidable and utterly unnecessary.
For context, almost no other country in the world even has a debt ceiling. Denmark is the lone exception among advanced nations, and the Danes routinely raise their limits as needed. Every other advanced democracy has a one-step approach to spending and taxes. Debate and vote on them once, and after legislation is passed all bills get paid. You and I do the same thing when we buy a home. Once we buy, we are committed to paying for it.
But in the U.S., we have a two-step process for federal spending. Congress debates and votes on spending and taxes, and then they periodically have a separate debate and vote on how much the government is allowed to borrow. In the past that second step was routine. Members of both parties in Congress have raised the debt ceiling 78 times since 1960. Republicans raised it regularly while George W. Bush and Donald Trump were in the White House and have threatened not to raise it only when Democrats are president. In contrast, Democrats have never threatened not to raise the limit, because doing so is reckless, a fact which politicians on all sides formerly agreed. Even Donald Trump knows it is a bad idea. In 2019 he declared, “I can’t imagine anybody even thinking of using the debit limit ceiling as a negotiating wedge.”
Well, Kevin McCarthy of California can imagine it. The Republican Speaker of the House of Representatives has aligned his party behind a threat to let the nation go into default unless the Biden administration agrees to future spending cuts totaling approximately $5 trillion. The Biden administration has responded by demanding an increase with no strings attached and then negotiations over spending as part of the usual cycle of budget negotiations.
The latter is the only sane option, and that’s not because spending does not need to go down. It does. We are on an unsustainable federal budget path and should be discussing raising taxes and cutting spending simultaneously. At a time when the total federal debt tops $31 trillion and the government runs annual deficits in the hundreds of billions every year, that would be the responsible thing to do. But that is not what the debate over the debt limit represents. The debt limit is all about spending that has already been approved by Congress. It is about paying the government’s bills. McCarthy and his gang are holding the Biden administration (and by extension all of us) hostage and threatening economic disaster while trying to portray themselves as responsible managers of the budget who are desperate to reign in Democratic spending, but that portrayal is a flat-out lie. Remember, over half of the total national debt was accrued during the last four Republican presidential administrations. Tax cuts were largely to blame, but so were the wars in Afghanistan and Iraq, the response to the coronavirus pandemic, the 2008 recession, and the expansion of unfunded Medicare Part D prescription drug benefits.
To be fair, the rest of the debt falls on Democratic administrations, and includes the Biden administration’s Inflation Reduction Act. There is, in fact, enough blame to go around for both parties and every greedy American citizen who wants a check from the government but doesn’t want to pay taxes to share. The point is that Republicans are just as much to blame (and probably more so) for the debt as Democrats, and the way out of this mess is not to destroy the economy by going into default.
It’s also worth remembering that when Republicans made similar threats in 2011 during the Obama administration, they won concessions that attempted to cap spending. The process was called sequestration, and it failed miserably. It handicapped our defense budgets during ongoing wars and had a limited impact on deficits because Congress (especially under Trump) kept finding ways to work around the caps anyway.
Worse, Republicans have no idea what they would cut even if they could get reduced spending limits. McCarthy has been deliberately vague about specifics, and the GOP has announced that Medicare and Social Security are off limits. They usually don’t touch defense spending or the VA, and they can’t stop paying interest on the debt. That’s 2/3 of all federal spending. That leaves social programs like food stamps and medical care for the lower and middle classes at risk, but those programs predominantly benefit poor whites who are now the most important core demographic of the Republican base. Do we really think the GOP is going to gut programs for their own voters a year and a half away from a presidential election? It’s not likely.
You and I are pawns in all of this, with our own financial security held hostage by politicians so unpatriotic, so hell-bent on scoring political points, so unwilling to compromise or work toward the common good that they cannot even responsibly manage budgets. All we can do is hope for compromise, for an increase in the debt ceiling followed by a real debate over taxes and spending.
I’d like to say we deserve better, but I am not sure we do. If we did, we might vote more intelligently.
Lance Janda holds a PhD in History from the University of Oklahoma and has more than 30 years of experience in higher education. He is the author of “Stronger Than Custom: West Point and the Admission of Women”, among other works.